Enlightenment Through Understanding

College Degree – A Necessary Evil

A college degree in a high-paying field, such as STEM, finance or economics, can have a very good ROI. Contrary to the $100k-200k figures thrown around by the anti-college crowd, the average debt per student is around $30k, or about the same as a new car – except unlike a car, a degree doesn’t lose half its value after you drive it off the lot. In fact, given the growing wage premium between high school graduates and degree holders and the inflation-adjusted rising cost of tuition, a degree only gains value. While student loans are hard to discharge, paying them back is not the end of the world if you’re making a solid 5-figure or higher income with your STEM degree. Everyone freaks out about student loans like it’s the plague, when car loans and small business loans (or a loan for any expensive, depreciating product) are far worse.

As show below, degree holders -especially STEM majors – earn considerably more money than individuals without a degree:

A STEM major makes over $1.5-2 million lifetime. Even a crappy degree still has a 30% greater lifetime earnings potential than no degree ($750k vs. $1 million).

And degree holders not only make more money, but are much less likely to be unemployed:

A $50,000 STEM degree in exchange for $1 million in extra lifetime earnings seems like a good investment. Even if you took that $50k and put it in the stock market at 6% a year, you would only have $287,000 after 30 years. This underscores how it’s important to not take on too much debt and to major in something that pays well. And unlike the hypothetical investment scenario, the $50k in loans is ‘free’ money. You are making $1 million from no initial investment of your own, versus having to put up your own $50k capital to invest in the stock market. Even after accounting for taxes and repaying the loan, you are still left a very large chunk of money (assuming you live within your means and invest what is left over).

Credentialism is the real problem in that people need a degree to signal to employers a minimum threshold of competence, even if the degree is unrelated to the job. In the post-2008 hyper-competitive economy where for most jobs the supply of labor vastly exceeds the demand, employers have the luxury to choose the best and the brightest out of a very large pool of applicants for even the most mundane of jobs. Having the degree, which in many instances functions as an expensive, poorly-designed IQ test, gets your foot in the door. The anti-college crowd may be doing a disservice by encouraging people to pursue entrepreneurial activities that have little hope of success, particularity for people who are simply not smart enough to be successful entrepreneurs in today’s economy. If you’re smart and determined enough to be a professional coder without college, go for it.